Westan Corporation uses a predetermined overhead rate of $22.50 per direct labor-hour based on estimates of $270,000 in overhead costs and 12,000 labor-hours. However, actual overhead costs were $268,000 with 11,300 labor-hours worked. Using the actual overhead costs and labor-hours, the overhead rate would be $23.72 per hour rather than the estimated $22.50 rate.

1. Westan Corporation uses a predetermined overhead rate of $22.50 per direct labor-hour. This
predetermined rate was based on a cost formula that estimated $270,000 of total manufacturing
overhead for an estimated activity level of 12,000 direct labor-hours.
The company incurred actual total manufacturing overhead costs of $268,000 and 11,300 total
direct labor-hours during the period.
Determine the amount of manufacturing overhead that would have been applied to all jobs
during the period.
Westan Corporation uses a predetermined overhead rate of $22.50 per direct labor-hour. This
predetermined rate was based on a cost formula that estimated $270,000 of total manufacturing
overhead for an estimated activity level of 12,000 direct labor-hours.
The company incurred actual total manufacturing overhead costs of $268,000 and 11,300 total
direct labor-hours during the period.
Solution
the amount of manufacturing overhead cost= 268,000/11300= $23.7168, which is higher than the
standard cost